3 year Guaranteed Growrh Bond at 2.20%

[ivahunch]

DAK if NS&I 3 year Guaranteed Growth Bond at 2.20% is worthwhile?

[gryffron]

Well since CPI is currently at 3.1%, I would have to say "worthwhile", no.

Is it the best you can do? Probably, right now. Several banks have better introductory rates but only for a few thousand pounds.
https://www.moneysavingexpert.com/savin ... t-interest

Interest rates look likely to increase over the next few years. Though when and by how much is hard to predict. But I'd want a big reward to tie in for an extended length of time.

Gryff

[Nocton]

It's guaranteed to be worth less in real terms in three years time!
Move to a peer to peer lender like Ratesetter for a better rate of interest that is not guaranteed to lose you money.

[Itsallaguess]

Move to a peer to peer lender like Ratesetter for a better rate of interest that is not guaranteed to lose you money.

Ratesetter might not be 'guaranteed to lose you money', but the much more important question, I imagine, is if it's guaranteed not to lose you money?

Can you give that guarantee to the OP?

Cheers,

Itsallaguess

[Nocton]

All I can say is that Ratesetter has been in operation for years and has not lost any saver any money. As they say: "Investments with RateSetter are protected by the Provision Fund which provides a buffer against poorly performing loans. RateSetter aims to maintain the Provision Fund at a level intended to cover all expected future loan defaults. The Provision Fund has a 100% track record: to date, every investor has received the returns they expected. We are proud of this track record. "
That's not as good as the UK government's guarantee, but pretty good.

[beeswax]

All I can say is that Ratesetter has been in operation for years and has not lost any saver any money. As they say: "Investments with RateSetter are protected by the Provision Fund which provides a buffer against poorly performing loans. RateSetter aims to maintain the Provision Fund at a level intended to cover all expected future loan defaults. The Provision Fund has a 100% track record: to date, every investor has received the returns they expected. We are proud of this track record. "
That's not as good as the UK government's guarantee, but pretty good.

I've never heard of that company and so just googled it and can't see how they can have a provision fund that covers all loans as they would need millions more to do that and they do state your capital and interest could be at risk....I did notice this though for loans to individuals..

Typical borrower APR: 2.9% to 49.9%

49%? And they expect borrowers won't default if that sort of level is imposed on their loan?

I wouldn't be tempted..

They don't say what they take themselves from your money?

[PinkDalek]

I've never heard of that company [Ratesetter] and so just googled it ...

Peer to peer lending is often discussed at "Other Investing". Here is a Topic commenced by Clariman back in May:

Peer to Peer - experiences and risk?
viewtopic.php?p=51286#top

They don't say what they take themselves from your money?

Where have you looked?

https://invest.ratesetter.com/investment includes:

Are there any fees?

There are no initial investment fees or annual management fees when investing with RateSetter.

There are no fees when you request to ‘Release Your Investment’ from the Rolling Market. If you invest in the 1 Year market or the 5 Year market and want to ‘Release Your Investment’ before the end of your term, you will pay a Transfer fee. You can access a personalised quote for this fee in the Members Area on ratesetter.com.

[Redmires]

Getting back on topic, I'd say that the Growth (and similar "Income") Bonds are one of the best on offer at the moment. The 1 year deal isn't bad as well. I've moved a significant amount into both, which is double the rate I'm getting at the moment. A few things in its favour ...

a) 100% rock solid gaurantee (government backed)

b) Favourable interest rate

c) Unlike most fixed bonds, you can access your money should you need to (subject to a 90 day loss of interest).

d) In my humble opinion, interest rates will not be increasing too much in the next 2 or 3 years. The rate may be bettered by others before the end of the 3 year fix, but not by that much.

NS&I have been one of the few institutions to react to the recent BOE rate rise, increasing the Premium Bond prize fund rate to 1.4%.

I have other investments as sell, such as trust funds and equities but personally I wouldn't touch P2P and Bitcoin and other unregulated alternatives.

[Nocton]

personally I wouldn't touch P2P and Bitcoin and other unregulated alternatives.

Redmires, to compare P2P with Bitcoin is ludicrous. In any case Ratesetter (and other similar P2Ps) is regulated by the FCA. There is just no guaranteed £85,000 compensation if the company fails.
You say: "I have other investments as sell, such as trust funds and equities". These do not have anywhere near as good protection and have a much higher level of risk than Ratesetter with its Provident fund. Just look at the Protection page on https://www.ratesetter.com/invest/everyday-account
And you can access your money quickly when you need it without any loss of interest.

And I don't agree that this is getting off topic ("Getting back on topic") as the OP asked if the offered reinvestment was worthwhile, by implication compared with other interest bearing investments.

[Redmires]

You protesteth too much. Who's comparing Bitcoin to P2P ? I merely said I wouldn't invest in either. In your words

"There is just no guaranteed £85,000 compensation if the company fails" Hmmmm !

And of course trusts funds and equities have no guarantee protection but as part of a balanced portfolio they serve a purpose.

[Stonge]

Of course the law can't always protect us against dishonesty.

Post-Brexit we won't even have the European Socialist Model to defend us.

[SKYSHIP]

Time was when the best route to above average secure returns was via Zero Dividend Pref shares - ZDPs.

I well remember the early 2000s when investors were ditching them in droves and others, who were able
to research, picked them up on 15%+ GRYs - Happy Days.

Nowadays there are very few ZDPs left. INLZ can be bought at 149.75p (inc.costs); they redeem at 155.9p
on 10/04/19 for a GRY of 3.2%. SDV are in the throes of issuing some new 7yr ZDPs on a 4% yield - could be
worth looking at the prospectus.

For me the best bet now is to buy occasional liquidation plays. Best bets might be LSR @ 31.5p with a likely
payout of 35p-37p at end 2018. Also NBDG @ 79 with a likely payout at 100p by end 2019.

[SKYSHIP]

Opportunity today - INLZ is rarely traded; however someone dumped 14k @ 146p. I've topped-up with 7500 @ 147.2p, that = 147.95p inc. costs.

That provides a GRY of 4.2%.

Hardly substantial; but attractive for a small allocation in my SIPP.

[JohnB]

My elderly mother is renewing these. It seems a good choice for the risk averse. 3 year ones to avoid the annual hassle.

[RG2017]

The 3 year bond is a good option at 2.20% and if you want the money earlier the 90 day penalty is quite generous.

After one year, the penalty would be 2.20% x 90/365 or 0.5425% making the effective net rate for 1 year 1.6575% (2.20% -0.5425%). This would appear to make the 1 year bond at 1.50% somewhat redundant.

However, I have heard that the 90 day penalty would not be deductible from the annual PSA which could be significant if you were near the PSA limit.

[GeoffF100]

The 3 year bond is a good option at 2.20% and if you want the money earlier the 90 day penalty is quite generous.

After one year, the penalty would be 2.20% x 90/365 or 0.5425% making the effective net rate for 1 year 1.6575% (2.20% -0.5425%). This would appear to make the 1 year bond at 1.50% somewhat redundant.

However, I have heard that the 90 day penalty would not be deductible from the annual PSA which could be significant if you were near the PSA limit.

I am way above the Personal Savings Allowance of £1,000, but still a standard rate tax payer. I thought that a 90 day interest penalty was the same as 90 days loss of interest for tax purposes, but the NS&I documentation does say that If I cash in within the first 90 days, I will get back less than I put in. What is the income tax position here? Is the 90 day interest penalty allowable against income tax? I have not been able to find any information on this. If it is not, after cashing in after one year, for a standard rate tax payer, the interest rate becomes 2.2% * 0.8 - 0.5425% = 1.2175%, which is the equivalent of 1.2175% / 0.8 = 1.521875% gross. That is still better than the best instant access account.

I am carrying a lot of cash, and the 3 year bond looks an attractive option for some of this money. A fly in the ointment is that I have to buy the bonds online with a debit card. In my experience, that limits the amount per deposit to about £20,000. I do not want the admin of multiple bonds, but perhaps I will have to put up with that.

[kiloran]

A fly in the ointment is that I have to buy the bonds online with a debit card. In my experience, that limits the amount per deposit to about £20,000. I do not want the admin of multiple bonds, but perhaps I will have to put up with that.

It wasn't a problem for me with a single 50k transaction. Maybe it depends on the bank.

--kiloran

[GeoffF100]

Thanks for that Kiloran. I have not tried a large Visa Debit for a few years. Last time I tried, I phoned Santander beforehand to authorise it, but it still failed. When I rang them again, they said that it had hit a Visa daily limit. When I asked what the limit was, they said it varied from day to day. I did not believe them. I thought that they had messed up the authorisation, but did not want to own up to it. Santander allows £100K Faster Payments, and I always have large sums of money flowing through my account, so perhaps they should grant me some slack.

I am tending towards £20K in my Santander 123 account (1.5% gross) and £30K in the Guaranteed Growth Bond, with a Post Office Online Saver (1.3%) as an overflow account. That is three accounts just to manage cash.

[SKYSHIP]

My own experience with very well educated and successful friends, most far more successful than me career-wise, is that the vast majority of them are total innocents when it comes to the stock-market. Accordingly they have to delegate the management of their capital and their pension funds; and pay the penalty in fees and lower performance. Most are happy to see 5% returns; whereas I compound through active management at 13%pa - though admittedly in 2017 at just 11.6%.

Posters on this thread must surely be Market-aware, otherwise why are they on LemonFool?

So, what is it that you are discussing with deposits earning 2.2%pa?

On this very subject I've just posted this below on ADVFN's Fixed Income thread - as you should know, ADVFN is the free site for private investors - ADVFN is the largest and best site BY FAR.

I would urge you all to listen to that interview link at the bottom of the post.
===================================

ADAM:

# CLS 5.5% 31/12/19 (CLS1) @ 104.40p....GRY = 3.12%
# Helical Bar 6.0% 24/06/20 (HB20) @ 105.30p...GRY = 3.62%
# Hammerson 6.0% 23/02/26 (72VH) @ 126.65p…GRY = 2.01% !!!

So not a whole lot of joy there; though please do check those calculations.

Seems to me that the 4.2% possibly still on offer from INLZ is generous by comparison. As is the 4.27% from the Balfour Beatty prefs (BBYB) @ 114.3p inc S/D.

A boost to overall yields could then come from RECI @ 168p (7.1%) and the very handy 7.7% from the propco RGL – the highest yielding of the new Income Sector propcos.

I post below a link to a Citywire interview with the CREI CEO – they trade at a NAV premium, so not my favourite. But the interview expresses admirably just why many of those regional-centric propcos should be represented in any portfolio – the main reason being the widest ever spreads between the average 3.5% cost of debt and the 8%+ income yield from good tenancies. Also perhaps explains just why CREI are able to continually place new shares to institutions at an NAV premium.

Well worth a 10minute listen:

https://tinyurl.com/ycyn8o3x

[GeoffF100]

So, what is it that you are discussing with deposits earning 2.2%pa?

Some of us do not want to take big risks with all our money. Most people want to have a large proportion of their money invested safely. Even some risk lovers want money to invest when the markets fall, which they always do, sooner or later. Others need money to pay their bills. Some people are lucky for a while, and make big returns. Some of them are foolish enough to think that their success is the result of skill, and will continue forever.